German opposition SPD threatens to block Cyprus aid -Spiegel

BERLIN

BERLIN Feb 2 Germany's opposition Social
Democrats (SPD) will only back a bailout for Cyprus if Nicosia
agrees to consolidate its banks among other conditions, the
party's challenger to Chancellor Angela Merkel was quoted as
saying on Saturday.

"SPD agreement will only come under certain conditions,"
Peer Steinbrueck, who takes on Merkel in September's election,
was quoted in Der Spiegel weekly as saying.

Before any rescue deal, Cyprus would have to consolidate
"its completely bloated banking sector" and wind up some
institutions, the magazine quoted Steinbrueck as saying.

In addition, the government in Nicosia must tackle money
laundering, introduce a financial transaction tax and end what
Steinbrueck described as "tax dumping". Cyprus has the euro
zone's lowest nominal corporate tax rate.

"The chancellor should address these four criteria very
quickly," he said, according to Der Spiegel. "We will make our
agreement to aid dependent on the reaction."

Cyprus, whose troubles stem from its banks' exposure to
crisis-hit Greece, sought aid from the European Union and
International Monetary Fund last year.

It is unclear when any rescue will be finalised and there is
strong resistance in Germany, where media have made much of
Cyprus's status as a popular tax haven for wealthy Russians.

Merkel needs the support of the centre-left SPD to get a
deal through the Bundestag lower house. Until now, they have
supported Merkel's euro zone policies but they have reservations
about Cyprus due to concerns about money laundering.

Cyprus insists it conforms to international rules against
money laundering.

Steinbrueck, a former finance minister, has taken a tough
line on tax evasion since being chosen as his party's
"chancellor candidate" a couple of months ago.

However, several members of Merkel's own conservatives are
also sceptical about granting aid to Cyprus.

"I do not see that Cyprus is system-relevant and only in
that case can the European Stability Mechanism (ESM) help," said
senior conservative lawmaker Michael Fuchs in Der Spiegel.

Due to the resistance, Merkel's government is trying to
delay any decision on aid to Cyprus.
(Reporting by Madeline Chambers; Editing by Jason Webb)